PERMANENT AND TEMPORARY PRICE VARIATIONS: A Decomposition Analysis based on Stochastic Forecasting Models

Eatzaz Ahmad and Sheena Naz Ali

Pakistan Journal of Applied Economics, 1999, vol. 15, 55-72

Abstract: This study decomposes major price indices in Pakistan into permanent and transitory components using the Beveridge and Nelson (1981) methodology. The results show that most of the peice variations are permanent with a mojor portion being deterministic. The transitory variations in the consumer price index are only slightly greater than those in the wholesale price index. Therefore, rent-seeking activities at the retail level are limited. Although a similar pattern holds for the open market versus official exchange rates, rent seeking can be prevalent because the market is thin and operates on a spot basis. The study concludes that a forecasting strategy based on the Beveridge-Nelson approach removes the bulk of uncertainty from peicesm though risk cannot be avoided.

Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://aerc.edu.pk/wp-content/uploads/2017/02/Perm ... per-page-55-72-1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pje:journl:article1999iii

Access Statistics for this article

More articles in Pakistan Journal of Applied Economics from Applied Economics Research Centre Contact information at EDIRC.
Bibliographic data for series maintained by Samina Khalil ( this e-mail address is bad, please contact ).